Big ag data day opens with, mild, win for bears

November 10th, 2014

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Category: Grains, Oilseeds

Young man in wheat field 450x299(Agrimoney) – The first set of ag data on Monday gave a little more succour to bears than bulls.

But will the main batch later on follow suit?

The Malaysian Palm Oil Board said that Malaysian palm oil inventories rose 3.7% month on month to 2.17m tonnes in September.

That was a 20-month high and a touch above market expectations, and reflected a smaller-than-expected drop in production, of 0.2% to 1.89m tonnes.

Sure, separate data on Monday from Intertek Testing Service showed a small rise, of 1.3%, in Malaysian palm oil exports in the first 10 days of November, compared with the same period of last month.

But Kuala Lumpur palm oil futures for January weakened after the exchange’s midday break, standing 0.7% higher at 2,211 ringgit a tonne as of 08:40 UK time (02:40 Chicago time), below a pre-data high of 2,231 ringgit a tonne, with “sell the rumour, buy the fact” thinking seen as having some influence.

The contract, which has closed the last four sessions lower, also fell below its 100-day moving average, on a continuous chart, at 2,218 ringgit a tonne.

‘Come down significantly’

But the main course as far as ag data goes comes at 17:00 UK time with the release by the US Department of Agriculture of its monthly Wasde crop report, updating a swathe of supply and demand data, domestic and global, on corn, soybeans, wheat etc.

And, unlike the last couple of Wasdes, this one is not coming against a backdrop of ever-increasing forecasts for US corn and soybean harvests – although both are still expected to set records.

“Expectations are that USDA will raise yield and production but analysts’ average estimates have come down significantly from early October expectations,” said Benson Quinn Commodities.

At Futures International, Terry Reilly said: “We are under the impression the yield could actually shrink a touch after late-season field reports called for yields below the early-harvested reports this season.”

‘Will stall harvesting’

As an extra potential prop, the latter stages of the US autumn harvest is encountering less benign conditions in some areas, with Benson Quinn Commodities flagging the likelihood of “hit and miss” progress over the weekend, with weather “not co-operating like it had for the last couple of weeks”.

The US saw rain and snow in parts of Ohio, Minnesota, Wisconsin and Michigan, with more expected early this week, spreading further west into the likes of Iowa and South Dakota, said MDA.

“Snow showers across northern areas will stall corn and soybean harvesting,” the weather service said, if adding that drier weather is forecast heading into the weekend.

‘Moisture stress is increasing’

And conditions are improved, but not perfect, in South America, where in Argentina, “moisture stress is increasing in northern areas”, MDA said, although “wetness should ease in southwest areas”.

In Brazil, where a lack of rainfall has been more of an issue, “showers forecast in Sao Paulo, Parana, Goias and Minas Gerais will continue to improve moisture”, but drier weather lies ahead.

And, as far as row crops got, it is Mato Grosso which is the most important state, although eastern parts did receive some rain over the weekend.

Sao Paulo is key for Brazilian sugar production, and Minas Gerais the top coffee-growing state, where rains will indeed be welcome after drought for much of 2014.

Soy rises

Still, the clincher for bulls in the soy complex was the firm early performance by soymeal, which added 0.3% to $391.70 a short ton in Chicago for December delivery, helped by talk of firmness remaining in US cash markets.

The feed ingredient is being boosted by a squeeze on supplies, thanks to the slow start to the soybean harvest and to America’s rail logistical issues (over which The Andersons cautioned last week), and with domestic users and importers competing strongly for what is available.

Soybeans themselves gained 0.1% to $10.38 ¼ a bushel for January delivery, bolstered also by a 0.8% gain to 32.65 cents a pound in the December soyoil contract.

Hedge fund positioning

But, as in the last session, grains struggled to follow soybeans’ strength – even corn, which has for much of the last month or so been supported by its fellow row crop.

Corn for December shed 0.5% to $3.65 ½ a bushel.

“Technically speaking, corn seems pretty well bracketed by $3.60 a bushel on the low side and $3.80 on the high side, for now,” CHS Hedging said.

One problem for bulls is that hedge funds have already closed a stack of their short positions in Chicago corn futures and options – nearly 100,000 contracts, in fact, in three weeks.

That reduces the ammunition for further support to prices on that score.

Hedge funds’ net long in corn is now back above 160,000 contracts for the first time in five months.

‘The short hedge’

Chicago wheat for December dropped 0.4% to $5.12 ¼ a bushel.

Speculators have curbed their negative positioning on the grain – although not so much as in corn.

Indeed, have they started reopening short positions on wheat, a contract hedge funds have historically felt comfortable focusing their selling pressure on?

Benson Quinn Commodities said that for much of last week, it seemed that “Chicago wheat has become the short hedge against new length in the row crop markets”.

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